UTC wins latest court battle over engine pricing; more than half a billion dollars at stake

United Technologies Corp. has prevailed in its latest appeal of decades-old claims that its Pratt & Whitney division overcharged the U.S. government for jet engines.

The 6th Circuit U.S. Court of Appeals in Ohio on Monday remanded the case back to the trial court that more than a year ago ordered the company to pay $657 million in damages.

The case centered on pricing and competition for the jet engines that power the F-15 and F-16 aircraft, and the remand all but guarantees that the litigation surrounding the program will outlive the production and assembly of the engines.

In his decision, U.S. Circuit Judge Jeffrey Sutton hinted at the fatigue many have with the case.

"We are tempted to say that, after seventeen years of litigation about a fraud that occurred thirty-two years ago, the time has come to end this dispute," he said.

He added, however: "The government had the burden of proving damages, and it never did."

The U.S. attorneys, Sutton said, "had every opportunity to put on an expert to show whether competition affected its damages. It not only refused to do so, but it also successfully objected to Pratt's own efforts to put on a pricing expert. On this record, there is something to be said for leaving that at that."

The remand is a major victory for United Technologies, which maintains that the government suffered no actual damages from certain inaccurate statements it says it made in 1983. But it does result in a repeat of the same fight over whether, as the government claims, Pratt's pricing and competition for the contract resulted in the government overpaying for jet engines.

Pratt & Whitney has produced roughly 7,000 of the F100 engines for the military's F-15 Eagle and F-16 Fighting Falcon. The engines are assembled in Middletown, at least for now.

"Unless we find more customers it will go out of production next year," the company's head of military engines, Bennett Croswell, said in an interview last week.

And for the litigation: "At the rate this is going, the case might have to be closed out by Bennett Croswell's son someday," said Loren Thompson, a defense analyst with the Lexington Institute, a think tank in Arlington, Va.

He compared the government's persistence in the Pratt case to the court battle following the cancellation of the A-12 Avenger tactical aircraft. In 1991, McDonnell Douglas and General Dynamics filed a breach of contract suit against the Department of Defense, a case that stretched on for more than two decades, making it to the Supreme Court in 2012 before being settled in 2014.

"The federal government probably shapes up to be the hardest customer to do business with in the Western Hemisphere," Thompson said. "Any other customer would say, I don't have 20 years and $100 million to prosecute a case, so let's compromise. But Washington is willing to let things go on forever."

United Technologies spokesman John Moran said the company is pleased with the court's view that the government failed to establish that there were actual damages. "We look forward to returning to the district court to finally put an end of this long-running case," he said.

The initial case against United Technologies claimed that Pratt withheld pricing documents and inflated costs for some purchased parts, which resulted in the government overpaying for the engines from 1985 to 1990.

The first case, which ended in 2005, held Pratt liable for as much as $624 million, though because of later price concessions the company made, the court found there were no actual damages. In the end, the U.S. Court in Ohio's Southern District ordered Pratt to pay $7 million for False Claims Act violations.

Both parties appealed the case in 2008. The resulting review from the appeals court held Pratt liable for damages but sent the case back to the trial court to calculate the value of those damages. In 2013, the U.S. District Court awarded the government $473 million in damages plus interest. That decision led to the most recent appeal.